Filing for bankruptcy is not something that should be done without careful research. While bankruptcy does allow a person to get free from debts that he or she would never be able to pay back, it is a fairly complex legal procedure and it is important for it to be done right. Hiring a bankruptcy lawyer is often a good idea and can help a person not only get debt free but also keep some of his or her personal assets in the process.
The first step is determining what type of bankruptcy to file for. A person can file for either Chapter 7 or Chapter 13. Only a lawyer will be able to tell a person what type of bankruptcy to file for but most people need to file under Chapter 13. This type of bankruptcy discharges most debts but also sets up a three to five year repayment plan for certain types of debts.
Once a person has filed for bankruptcy, he or she will need to meet with a court appointed mediator. Creditors, along with their lawyers, will also attend this court appointed meeting. At this time, the mediator will determine which assets a person can keep and which must be sold. In some cases, a person is permitted to keep his or her home, although this is not always possible. However, a court will nearly always allow a person to keep essential personal belongings (i.e. personal care items, clothing, etc) along with tools that one uses in order to earn income (for instance, a professional carpenter would be permitted to keep carpentry tools; a secretary would be permitted to keep her computer and computer desk, etc.)
Creditors are permitted to challenge a person’s bankruptcy claims in court and ask the court to mandate that a person pay back certain debts. Thankfully, if a person has a bankruptcy lawyer, these claims are not overly difficult to deal with and a creditor must have a very good reason to challenge the proceedings in this way.
A Word of Caution
It is very important to note that there are a few types of debt that cannot be discharged under any type of bankruptcy proceedings. Alimony payments, court fines and back taxes must be paid no matter what type of bankruptcy a person files for.
Filing for bankruptcy allows a person to discharge debts and start afresh financially. It is not an easy time for a person to go through but in the end it does have numerous advantages if it is done properly. The first step is to hire a lawyer, prepare the paperwork showing all available assets and then take the papers to court and declare legal bankruptcy. Once bankruptcy has been declared, foreclosure proceedings come to a temporary halt and creditors are no longer permitted to call a person until a court appointed mediator determines just how much (if any) debt a person has to pay back and when this debt must be paid by.